Tesla Motors could get a dent on its image if it does not address the issue of high repair costs for cosmetic damage to the Model S, says a report from Seeking Alpha by Paulo Santos. If the issue persists for long, then it could destroy company’s reputation, affect trade-in values and increase already-high insurance rates for Tesla owners and, in turn, drop demand for Tesla’s cars, noted Santos.

Tesla Motors Inc Must Address This Issue First

More flexible policies from Tesla needed

Santos advises the Palo Alto-based company to acknowledge the threat and act accordingly. The issue stems primarily from the way Tesla has designed its authorized shopping network. The company allows only authorized shops to order parts. Also there are fewer authorized shops, leading to overcharging because the competition for business from Tesla owners is less.

Another issues noted by Santos is related to insurance companies. Since Tesla’s cars are relatively new to insurance companies, “There seems to be a measure of price gouging going on – much of it directed at the insurance companies.” The author states that the real problems are at the repair shop level, as the hourly rates charged by authorized repair shops are a concern.

Santos also suggested measures which the company could use to fix this problem. Tesla could make its policies more flexible and allow independent repair shops to store spare parts. These steps will increase the competition and, in turn, control the reeling price gouging, says the report.

Act before it’s too late

The bottom line is, whichever way Tesla decides to go, the issue requires a quick step. With more time passing, it will become difficult for Tesla to control it as it becomes “common knowledge” and known to the public. Also if the car maker takes a reluctant approach toward this issue, then it will affect its reputation, potentially taking years for the company to fix, says Santos.

Also the company may not get time to come clear once it gets into direct competition in the EV segment. Many European brands such as Renault, Fiat, Peugeot, Alfa Romeo and Lancia faced similar situations and ended up selling their cars at a discount due to their unreliable reputation due the high cost of repair. In the same way, in the United States, Chrysler is still the victim of a bad reputation, and “Tesla does not want to go that route,” he said.